By Patricia Barry
March 2002

	Chart: Average Retail Prescription Prices Have Doubled in the Last 10 Years Chart: How the Pharmaceutical Industry Promotes Prescription Drugs Take the Poll: Drug Advertising Take the Poll: Out-of-Pocket Drug Expenses Join the Discussion: Medicare Reform

Year after year older Americans have to pay more for prescription drugs—at the pharmacy or in higher insurance premiums—and are feeling the pinch as insurers cut back on their benefits. Why, they ask, are these things happening?

It is a significant question, because what drives up drug costs now for individuals could also drive up the price tag of an eventual Medicare benefit, now being debated in Congress. (See Bush's Drug Plan Targets Low-Income Enrollees.)

The broad answer is that prescription drug spending—galloping up by around 17 percent a year—is the fastest-growing item in health care inflation. Rising drug prices are part of that growth. They are the highest in the world, because Congress has rejected the controls that other Western countries use to limit prices.

	Have you ever requested a new prescription drug from your doctor after seeing a consumer-oriented advertisement for the drug? A.Yes B.No

The biggest driver behind the growth in drug spending, though, is the fact that more people are using more medicines, often the newest and most expensive kinds.

There are many reasons for this surging demand—an aging population, for example, new drugs for old conditions and a shift from surgery to drugs as preferred treatment.

But a major question is to what extent the drug industry itself adds to the demand by aggressively promoting drugs to consumers and doctors. In 2000 the industry spent close to $16 billion doing that.

THE HIGH PRICE OF ADVERTISING
Advertising directly to consumers is one of the most controversial practices the drug industry uses to market its products.

Supporters of this kind of advertising, which is banned in nearly all other Western countries, say it provides a real service to consumers, informing them of new drugs and alerting them to health problems they may be unaware of.

Critics say the ads promote only the most expensive new blockbuster drugs, when older and cheaper ones might be just as effective, thus driving up overall health costs.

In 2000 the drug industry spent almost $2.5 billion on mass media advertising. This was a 35 percent increase over the previous year and more than three times as much as the $791 million it spent in 1996. (See How the Pharmaceutical Industry Promotes Prescription Drugs.)

This rapid growth dates from 1997, when the Food and Drug Administration relaxed its rules on television advertising. And the trend has set off alarms. Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee, wants Congress to examine more closely the impact of consumer ads on drug spending, his aides say. As co-architect of a leading proposal for a Medicare benefit, Thomas sees such advertising, they say, as potentially "a big driver of cost growth…and he wants to look at it further."

The trend has prompted similar questions from other legislators, consumer groups and health care organizations. In particular:

• Are consumer ads persuading patients to ask doctors for the most expensive drugs? Or for drugs they don't need?
  
  
• Are doctors more likely to prescribe them if asked?
  
  
• And to what extent are the ads helping to drive up prescription drug spending which, government reports show, is the fastest-growing area of health care costs?

There are no clear-cut answers to those questions, analysts say, but some information is emerging.

Thirty percent of Americans talk to their doctors about a specific drug they've seen advertised, and of these, 44 percent receive it, according to a recent study by the Henry J. Kaiser Family Foundation, a leading nonprofit health group. This suggests that if 100 million Americans saw the ads, 30 million would as a result ask their doctor about a specific drug and 13.2 million would get it prescribed.

On the other hand, the study shows, 1 in 3 people say their doctor had recommended lifestyle changes instead of or in addition to the drug; 1 in 4 had been prescribed a different drug and 1 in 5 received no drug.

These findings underscore the disagreements between critics and proponents of consumer drug ads. Some critics see the results as evidence of ads that boost demand for expensive drugs and perhaps cause some inappropriate prescribing. The Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry's trade group, takes a different view.